Interim report for the first nine months of 2017

Satisfactory financial results on the back of positive macroeconomic developments and high customer activity. Net profit of DKK 15.3 billion. Return on equity of 13.3%. Outlook revised upwards.

Danske Bank has announced its financial results for the first nine months of 2017.

“The first three quarters of the year were characterised by positive macroeconomic developments, high customer activity and increasing business volumes,” says Thomas F. Borgen, Chief Executive Officer. “Our partnership agreements in Norway and Sweden continued to attract new customers, and our lending and investment activity was generally high across our markets. Impairments remained low, mainly due to the low interest rates and solid credit quality. All in all, these factors helped us achieve a good result for the period. As a result of developments in the first nine months, we are revising our outlook for the year to a net profit in the range of DKK 19-21 billion.”

“We maintained a fast pace of innovation, launching several new business initiatives within areas such as mortgage finance, investments and mobile solutions. The solid financial results enable us to continue the considerable investments in digitalisation that we initiated some years ago and to continuously adapt our business to the major changes facing the financial industry.”

The report is available at danskebank.com. Highlights are shown below:

First nine months 2017 vs first nine months 2016
Danske Bank delivered a satisfactory result for the first nine months of 2017. Net profit was DKK 15.3 billion – an increase of 7% from the level in the first nine months of 2016. The result was driven by positive developments in the Nordic economies, high customer activity and impairment levels that continued to be low.

The return on shareholders’ equity after tax was 13.3%, against 12.6% in the first nine months of 2016.

Total income amounted to DKK 35.9 billion, against DKK 35.1 billion for the same period last year. Net interest income and net fee income continued to increase, leading to the increase in income of 2%:

Net fee income amounted to DKK 11.1 billion and was up 9%, primarily because of an increase in assets under management at Wealth Management and high customer activity, mainly at Corporates & Institutions.

Net trading income totalled DKK 6.3 billion and was in line with the same period of 2016.

Other income amounted to DKK 1.2 billion, a decrease of 51%. The decrease was caused primarily by the fact that the first nine months of 2016 benefited from the sale of domicile properties.

Operating expenses amounted to DKK 17.0 billion, an increase of 2% from the level in the first nine months of 2016. The increase mainly reflects higher costs related to compliance, regulation and digitalisation. The cost/income ratio fell from 47.3% to 47.2%.

Credit quality remained solid, and we made net loan impairment reversals for the first nine months of 2017 of DKK 632 million.

At the end of September 2017, total lending was up 2% and total deposits were up 7% from the levels at the end of 2016. Lending and deposits increased in almost all markets.

Developments at business units

At Personal Banking profit before tax increased 6% from the level in the first nine months of 2016, as increased income more than offset lower net impairment reversals. Income benefited from the continued increase in business volumes, the inflow of new customers in Sweden and Norway, and generally high activity levels within financing and investment. Operating expenses saw a decrease of 1% driven by cost efficiencies.

At Business Banking profit before tax increased 26% from the level in the first nine months of 2016, owing to higher income, lower operating expenses and large net impairment reversals.
Total income was up 5% due to higher activity and continually good business momentum, which resulted in higher net interest income and higher net fee income. Loan impairments amounted to net reversals of DKK 772 million, as a result of solid credit quality driven by higher property prices and improving macroeconomic conditions.

Corporates & Institutions posted a profit before tax of DKK 4.9 billion, an increase of DKK 1.4 billion from the level in the same period last year. The increase was based primarily on higher customer activity in the financial markets, driving both fee and trading income. Operating expenses were flat despite the increase in activity. Loan impairment charges decreased owing to a stabilisation in the offshore sector.

Wealth Management posted a profit before tax of DKK 3.2 billion, an increase of 2% from the level in the first nine months of 2016. The financial performance was driven by a net inflow of customers, strong premium growth in Danica Pension and improving net sales in Asset Management. Operating expenses were higher in the first nine months of 2017 due to increased activity, regulatory costs and costs for the transformation of the asset management organisation. Assets under management increased 7% from the level at the end of 2016.

In Northern Ireland, profit before tax fell 21% (in local currency) from the level in the first nine months of 2016. The underlying performance was positive when excluding the impact of lower UK interest rates and the one-off gain on the sale of VISA Europe in 2016. Despite the uncertain macroeconomic environment, lending and deposit volumes were higher for both business and personal customers. Operating expenses increased 9% owing to restructuring costs, pension-related costs and investments.

Strong capital ratios
At the end of September 2017, the CET1 capital and total capital ratios were solid at 16.7% and 21.6%, respectively, against 15.8% and 21.0% at the end of September 2016. Both ratios are above our targets. At the end of September 2017, the Liquidity Coverage Ratio (LCR) was 150%.

Outlook revised upwards
As a result of developments in the first nine months, we are revising our outlook to a net profit for the year in the range of DKK 19-21 billion. We previously expected net profit for 2017 to be in the range of DKK 18-20 billion.

We maintain our longer-term ambition for a return on shareholders’ equity of at least 12.5%.

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